U.S. Airlines Trade Fare Increases for Add-On Fees

Although fares are not increasing, the type and amount of ancillary fees have risen significantly in recent years leading to some of the highest profits that airlines have reported in years.

— Samantha Shankman

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The average price of an airline ticket for travel within the U.S. rose by just $1 last year, although prices are still modestly higher than they were five years ago.

The U.S. Department of Transportation said Tuesday that the average domestic airfare rose to $381 in the fourth quarter of 2013, a 0.3 percent increase from a year earlier.

The government said that the highest average fares were in Huntsville, Ala., at $528, and the lowest were $249 in Long Beach, Calif.

The figures, which are adjusted for inflation, mostly count round-trip fares, but about one-fourth are one-way trips if that’s what the passenger bought. Taxes are included, but fees for checking bags, boarding early or getting an economy-cabin seat with more legroom are not.

“The base fare may not be much higher, but because of the add-ons, it feels worse,” said Rick Seaney, CEO of travel site FareCompare.com.

As fees have multiplied, the airlines get a smaller percentage of their revenue from fares — 71.5 percent in 2013, down from 87.6 percent in 1990.

Seaney added that airlines are also pushing up fares for nonstop trips — in some cases charging 30 percent to 50 percent more for the convenience of avoiding connecting flights.

The airlines are able to do all this because they are successfully limiting the supply of seats. After four major mergers since 2008, the four biggest airlines now control more than 80 percent of the U.S. air-travel market.

Most planes are likely to be full this summer during peak vacation season. That means when flights are canceled because of thunderstorms at big, hub airports in Dallas, Chicago and elsewhere, it could be days before stranded passengers find a seat on another flight.

The airlines have long argued that airfares have risen more slowly than many other things consumers buy, from a gallon of milk to the cost of college tuition.

Airfares are up 10.2 percent from 2009, when the U.S. was digging out from the worst of the Great Recession. But they are down 16.3 percent since 2000 — the peak year for airfares — while overall consumer prices have risen 33.9 percent, the government said.

“It’s a great time to fly,” said Jean Medina, spokeswoman for Airlines for America, an industry trade group. “Air travel is one of the best consumer bargains in America, given its superior speed and price versus other modes of travel.”

It’s also a great time for the airlines.

Delta Air Lines Inc., American Airlines Group Inc. and Southwest Airlines Co. are expected to report this week that they earned a combined profit of more than $700 million in the first three months of 2014. That’s usually the slowest time of year for travel, and it was considered remarkable when those airlines earned $200 million in the first quarter of last year.

Among the big four, only United Airlines parent United Continental Holdings Inc. is expected to report another large loss.

George Hobica, founder of the travel-shopping site airfarewatchdog.com, sees a connection between glowing financial reports and the slower pace of airfare increases.

“The airlines are profitable, and they’ve reached the limits of what consumers can afford, so they’ve dialed back on fare increases,” he said.